Telstra
has joined forces with ­Indonesia’s biggest telecommunications provider, Telkom Indonesia, in its first major push to take on ­established players like SingTel and BT in selling technology services to companies in Asia.

Telstra and Telkom Indonesia signed a non-binding memorandum of understanding on Thursday to form a 50-50 joint venture.

Both companies expect the Indonesian technology service market to be worth $2 billion per year by 2020.

The deal will see the cloud ­computing and technology services of Telstra’s growing network applications and services business unit being sold to the large customer base of Telkom Indonesia with both sides sharing the costs and the profits.

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Analysts say the strategy could help turn Telstra into a serious player throughout the region at a relatively low cost and decrease the need to make expensive and risky acquisitions. ­Telstra Global Enterprise and Services group executive
Brendon Riley
said the company was keen to make similar partnerships on a country-by-country basis, which analysts say could help it rapidly grow market share.

“It is one of the first big steps [for Telstra’s NAS expansion into Asia], particularly it’s one of our first big steps into the Indonesian market as a company," he said. “We started conversations with Telkom Indonesia about a year ago . . . and they have significant market share in fixed-line, mobile and enterprise. ­ It is one of the first big geographical expansion plays for Telstra and NAS . . . and I think [partnering geography by geography] is where we’re headed at the moment."

“We must become more and more involved in Asia. We just don’t have an option," he said at the time. “Now the question is how. Do we go out there and invest enormous amounts of capital?

“Or do you take your capability and take it into other countries?"

Both parties expect to start selling services with a binding agreement from mid-2014 onwards.

While Mr Riley wouldn’t comment on financial forecasts or the investment being made on the new venture, market sources said the company had allocated around $20 million to getting the joint venture up and running.

They added that around 100 local Indonesian and expatriate Australian staff are expected to be in the new business within 12 months with plans to grow the workforce to 400 over several years if the venture is a success.

Partnerships reduce risk

JPMorgan Australia managing director for research, Paul Brunker said partnering with local telcos throughout the region could reduce the need for Telstra to make risky ­acquisitions in Asia.

Telstra’s biggest Asian challenge has been growing its NAS business against long-established rivals including BT, SingTel and Verizone – all of whom sell similar services.

“You might have local incumbents who are still predominately telcos and haven’t developed a meaningful NAS offering," he said.

“Rather than trying to grow organically and lose out to the multinationals they could bring in a partner like Telstra so at least they keep half of the money. One question people sometimes ask is whether Telstra is credible as an IT company. If it can do more deals like this it will help validate its credentials."

Credit Suisse analyst Fraser McLeish said Telstra’s strategy could help it take on the bigger player much more effectively than previously expected.

“This is not a huge deal . . . but if they can piece together a few of these partnerships and maybe bolt on some acquisitions as well as getting some organic growth then the Asian strategy could become quite meaningful quite quickly and big enough to move the dial," he said.